Oil crosses US$70 threshold in London as worldwide glut dwindles

Pipelines run to Enbridge Inc's crude oil storage tanks at their tank farm in Cushing, Oklahoma March 24, 2016. — Reuters picPipelines run to Enbridge Inc’s crude oil storage tanks at their tank farm in Cushing, Oklahoma March 24, 2016. — Reuters picLONDON, Jan 12 — Oil briefly topped US$70 (RM280) a barrel in London for the first time in three years, as crude markets continued an almost unblemished run of gains for 2018.

The surge waned towards the end of the session, with the global benchmark settling just six US cents higher for a fourth day of gains. An eight-week long downward spiral in has helped boost prices, with some analysts suggesting US$80 is achievable if the Organisation of the Petroleum Exporting Countries and its allies stay disciplined in limiting output.

So far this year, the crude market has risen every day but two, helping increase the S&P 500 energy index about 6 per cent over that span.

“This is a pure and simple response to inventory numbers that have been pretty decent,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “Opec is being exemplary citizens here, keeping supply under wraps. Demand is doing very well. Technically, we’re at a point where it won’t take very much to move Brent toward US$80 plus.”

US crude output declined by the most in almost three months last week as a deep freeze forced drillers to suspend operations. This led to draw-downs at the biggest American storage hub in Cushing, Oklahoma, where inventories sit at the lowest level since February 2015.

“The glut is gone. People are starting to realise that,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. “The global economy is on fire right now. Opec doesn’t look like they are going to be raising production anytime soon.”

Brent for March settlement ended the session at US$69.26 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of US$5.58 to March WTI.

West Texas Intermediate for February delivery advanced 23 cents to settle at US$63.80 a barrel on the New York Mercantile Exchange, the highest level since December 2014. Total volume traded was about 62 per cent above the 100-day average.

“There’s been a considerable run-up,” Tamar Essner, an analyst at Nasdaq Inc in New York, said by telephone. “It makes sense to see a bit of consolidation. We know there had been very high long positioning in the market, so it seems healthy.”

Yesterday, the S&P 500 energy index rose as much as 2.4 per cent, led by gains of more than 4 per cent for Anadarko Petroleum Corp, Apache Corp. and Chesapeake Energy Corp.

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“The inventory overhang has largely been exhausted,” Energy Aspects Ltd’s chief analyst, Amrita Sen, said in a report.

While the oil market is balancing, there is still some room for improvement, United Arab Emirates Suhail Al Mazrouei, also Opec president for 2018, said at a conference in Abu Dhabi. — Bloomberg

Source: The Malay Mail Online

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